|
Many Home Buyers are not aware that a FICO score check is one of the first steps in purchasing a home. After a Client goes to a mortgage lender to obtain a loan preapproval, the Lender will obtain the Buyer's credit report. Obtaining this credit report also shows the Lender what the Buyer's FICO score is. This is a crucial first step that determines the direction the lender can go in providing the Buyer a home loan.
A FICO score puts a number to the Buyer's credit history and ability to perform on a mortgage loan. The FICO score takes into consideration many factors, including past delinquencies, new accounts opened, recent credit history, balances of revolving credit (i.e. Visa) cards in relation to that cards maximum limit, current credit balances, number of recent credit inquiries, number of revolving accounts open, tax liens, judgments and bankruptcies. The resulting FICO score provides the Lender a risk evaluation of the Buyer, whereas in the past the Lender had to analyze the Buyer's credit report and produce their own risk evaluation of the Buyer.
A Buyer's resulting FICO score will be between 300 and 850, with 850 being the best. The higher the FICO score the better your chances of getting a loan. 60% of people have a FICO score of 700+. Lenders typically view a person with a 720+ score as an "A" Buyer, meaning you are viewed as a safe loan risk. In most cases having a 720+ score will result in a Buyer obtaining a loan at an excellent interest rate. The few people who have such outstanding credit to receive, say, an 800 credit score really are not viewed as a better loan risk than a person with a 720+.
A Buyer with a credit score under 700 will want to work on improving their credit score. Lower credit scores can result in a Buyer receiving a loan with higher interests or loan fees. Our Clients can meet with our Lenders to determine the best strategy for improving credit scores that are below 700. Although you can not raise your FICO score overnight, often times there are things that can be done immediately to start improving a FICO score. As a general rule you can assume that 1/3 of your FICO score is your payment history, which is your history of making payments on time. Another 1/3 of your FICO score is the amount you currently owe, which is your outstanding credit balance in relation to the maximum credit currently available. The last 1/3 of your FICO score is a combination of the length of time you have had a credit history, the number of new accounts you have opened, and the types of credit in use (i.e. credit cards, mortgage loans, school loans, etc.) Important to remember is that a FICO score gives more importance to recent credit history (i.e. past 6 months) than older credit history (i.e. 2+ years ago). While FICO scores can be critical in obtaining a mortgage loan, a Lender can be expected to also take into consideration the Buyer's income, assets and employment history.
Jason Brown Premier Realty Group's
mortgage lenders would be happy to explain how to improve your FICO score, if needed. Some of the key aspects they will go over with you are creating a history of making payments on time, paying down existing balances, keeping balances in good proportion to the maximums, limiting opening new accounts, an optimum number of total open accounts, avoiding dormant credit cards and disputing questionable bad credit history. If you want to get a jump start, you can find out your FICO score right now by going to...
MyFICO.com
At MyFICO.com you can get your FICO score & ALL THREE of your credit reports (
TransUnion
,
Experian
&
Equifax
) for about $50.
-----------------------------------------------
Don't want to pay $50 to find out your FICO score? Did you know that the three major Credit Reporting Agencies (TransUnion, Experian & Equifax) are required by law to allow you to view your credit report for FREE once each year? Right now you can view one, two or all three of your credit reports for FREE. Choosing all three free reports is beneficial since it would allow you to compare them to each other. However, you may also want to stagger the reports every few months (i.e. Get your FREE TransUnion credit report today, your Experian credit report four months from now, etc.). Getting YOUR FREE CREDIT REPORT(S) will allow you to analyze what creditors have put on your credit history. Please keep in mind that these credit reports DO NOT include your FICO score. You will have to pay if you want to see your FICO score as well. Regardless, the information that is on the credit report is what determines your FICO score, so it is very beneficial to know what is on your credit report. To get your FREE credit report(s) go to...
AnnualCreditReport.com
-----------------------------------------------
|